SEP IRA Contribution Calculator

Determine your maximum tax-deductible SEP IRA contribution for 2026. This calculator helps self-employed individuals and small business owners find their precise contribution limit based on net business income, business structure (sole proprietor vs. corporation), and employee compensation.

This tool is designed for freelancers, independent contractors, and small business owners looking to save for retirement. If you have a traditional W-2 job, you might find the 401(k) calculator or Roth IRA calculator more suitable. For a complete picture of your financial future, use our comprehensive retirement calculator.

The calculator provides your maximum personal contribution, the contribution rate, any mandatory costs for employees, your total plan cost, and the full tax deduction available to your business. You will also see a chart projecting your maximum contribution at various income levels, helping you plan for future growth.

Begin by entering your business's financial information. In the "Net Self-Employment Income" field, enter your net profit if you are a sole proprietor or your W-2 salary if your business is incorporated. Next, select your "Business Type" — this is a critical input, as the calculation method differs for sole proprietors (or LLCs taxed as such) and corporations.

If you have employees, move to the next section. Enter the "Number of Eligible Employees," which generally includes those who are age 21 or older, have worked for your business in 3 of the last 5 years, and earned at least $750. Do not include yourself. Then, enter the "Total Employee Compensation" for all of those eligible employees combined.

For more detailed planning, open the advanced settings. While SEP IRAs do not have a catch-up provision, you can indicate if you are age 50 or older for comparison against other plans like a Solo 401(k). You can also enter any "Other Retirement Plan Contributions" you make to see how your SEP IRA fits into your overall strategy.

Net Self-Employment Income

This is the starting point for your contribution calculation.

• For Sole Proprietors, Partners, or Single-Member LLCs: Enter your net earnings from self-employment. This is typically the profit shown on your Schedule C, less one-half of your self-employment taxes. The calculator handles this adjustment for you.
• For S-Corp or C-Corp Owners: Enter the W-2 compensation your business pays you.

Business Type

Your business structure directly impacts your contribution formula.

• Sole Proprietor/LLC: The contribution limit is effectively 20% of your net adjusted self-employment income. The calculation is more complex because it must account for the deduction of one-half of your self-employment taxes.
• Corporation (S-Corp/C-Corp): The contribution limit is a straightforward 25% of your W-2 compensation.

Number of Eligible Employees & Total Employee Compensation

If you have employees, you must contribute for them if they are eligible. An employee is generally eligible if they are at least 21, have worked for you in 3 of the last 5 years, and received at least $750 in compensation.

The key rule for SEP IRAs is that you must contribute the same percentage of compensation for your eligible employees as you do for yourself. This calculator determines your effective contribution rate and applies it to the total employee compensation you enter to find your mandatory employer cost.

Other Retirement Plan Contributions

This field is for informational purposes. SEP IRA contribution limits are generally separate from the employee deferral limits of plans like a 401(k). However, if you have multiple business-sponsored plans, the rules can be complex. This input helps you see your total savings picture. If you also have a W-2 job with a 401(k), you can typically contribute to both. Use the 401(k) contribution calculator to plan for that account.

This calculator follows IRS rules to determine your maximum SEP IRA contribution for 2026. The logic changes based on your business type.

For a Sole Proprietor or Single-Member LLC:

1. It starts with your net self-employment income.
2. It calculates the deductible portion of your self-employment tax (social security and Medicare tax).
3. It subtracts this tax deduction from your net income to arrive at your "net adjusted self-employment income."
4. Your maximum contribution is 20% of this adjusted figure.

For a Corporation (S-Corp or C-Corp):

1. It starts with your W-2 compensation.
2. Your maximum contribution is simply 25% of this compensation.

In both cases, the calculator applies two key IRS limits for 2026:

• The total contribution cannot exceed $70,000.
• The maximum compensation that can be considered for the calculation is $350,000.

If you have employees, the calculator finds your effective contribution rate (your contribution divided by your compensation) and applies that same rate to your employees' total compensation to find the required employer contribution for them. The total plan cost and tax deduction is the sum of your contribution and the employee contributions.

The formulas used depend on the business structure you select.

Sole Proprietor / LLC Formula

First, the calculator determines your net income adjusted for self-employment taxes.

SE Tax Deduction = Net Income x 0.9235 x 0.5 x 0.153
Adjusted Net Income = (Net Income x 0.9235) - SE Tax Deduction

Then, it calculates your maximum contribution based on the 20% effective rate, subject to IRS limits.

Contribution Base = min(Adjusted Net Income, 350000)
Your Max Contribution = min(Contribution Base x 0.20, 70000)

Corporation (S-Corp / C-Corp) Formula

The calculation for corporations is more direct, using a 25% rate on W-2 salary.

Contribution Base = min(W-2 Salary, 350000)
Your Max Contribution = min(Contribution Base x 0.25, 70000)

Employee and Total Cost Formulas

The formulas for employee costs and total deductions apply to both business types.

Effective Contribution Rate = Your Max Contribution / Your Compensation
Employee Cost = Total Employee Compensation x Effective Contribution Rate
Total Plan Cost = Your Max Contribution + Employee Cost
Total Tax Deduction = Total Plan Cost

For 2026, the rules for SEP IRA contributions are:

• Contribution Limit: The lesser of 25% of your compensation or $70,000.
• Compensation Cap: The maximum amount of compensation that can be used to calculate the contribution is $350,000.

It's important to remember that for sole proprietors, the "25% of compensation" rule effectively becomes about 20% of net self-employment income after adjusting for self-employment taxes. The calculator handles this complex adjustment automatically.

Unlike a 401(k) or IRA, SEP IRAs do not permit catch-up contributions for those age 50 and over. The maximum contribution is $70,000 regardless of your age.

For a self-employed individual with no employees (other than a spouse), the two most popular retirement plans are the SEP IRA and the Solo 401(k).

When a SEP IRA might be better: You have a high, stable income and want the simplest possible plan. When a Solo 401(k) might be better: Your income is lower or variable, you want to contribute the absolute maximum possible, you want a Roth option, or you want the ability to take a loan from your plan.

• Contribution Efficiency: This score shows how close your maximum contribution is to the absolute IRS limit of $70,000. A high score means your income allows you to take full advantage of the SEP IRA.
• Your Max Contribution: This is the most you can contribute for yourself for the year based on the income and business type you entered. This entire amount is tax-deductible to the business.
• Employee Cost: If you have eligible employees, this is the amount your business is required to contribute on their behalf. This is a critical cash flow consideration.
• Total Plan Cost: This is the sum of your contribution and the employee cost. It represents the total cash outlay for the business.
• Tax Deduction: This is the total amount your business can deduct on its tax return, which is equal to the Total Plan Cost.
• Contribution by Income Level Chart: This chart shows how your contribution potential grows as your income increases. It helps you visualize how future business growth can accelerate your retirement savings.

If you want to contribute more to your SEP IRA, your options are straightforward:

1. Increase Your Business Income: Since contributions are a direct percentage of your compensation, higher income leads to a higher contribution limit.
2. Consider Incorporation: If you are a high-earning sole proprietor, structuring your business as an S-Corporation could allow for a higher contribution. The 25% rate for corporations is higher than the ~20% effective rate for sole proprietors. This is a complex decision with other tax implications, so consult a professional.
3. Evaluate Other Plans: If your income is modest, a Solo 401(k) or SIMPLE IRA might allow you to save a larger percentage of your income due to their employee deferral components. A Solo 401(k) allows you to contribute up to 100% of your income up to the $23,500 employee limit, plus the employer portion.

1. Forgetting Employee Contributions: The most common and costly mistake is failing to contribute for all eligible employees. If you contribute for yourself, you must contribute the same percentage for them.
2. Incorrectly Calculating Compensation: Sole proprietors often miscalculate their "net adjusted self-employment income," leading to over- or under-contributing.
3. Missing the Contribution Deadline: The deadline to contribute to a SEP IRA is your business's tax filing deadline, including extensions. For most, this is April 15 or October 15 if an extension is filed.
4. Trying to Make Catch-Up Contributions: SEP IRAs do not have a catch-up provision. The limit is the same for a 30-year-old and a 60-year-old.
5. Not Understanding Vesting: All SEP IRA contributions (for both you and your employees) are 100% immediately vested.